How to Choose a merchant service provider for your subscription billing needs?

By
| Last Updated: May 26, 2017 |

Reading time: 7 minutes

Choice of merchants for your subscription billing needs

“Choice”

Getting a good merchant account provider is crucial for your subscription billing needs. Many SaaS companies assume that the merchant service provider with the lowest price is the right one. While it is important to check the merchant fees to ensure you will remain with tidy margins after subtracting the costs, price should not be the only or major factor to consider. In the article, we highlight some of the crucial things a business should consider when choosing a merchant service provider. (payment gateway)

Many businesses struggle to understand what it takes to successfully negotiate good pricing with merchant account providers. When setting up a business, most of the salient variables that will affect billing are usually not known. As a result, most businesses base their merchant choice solely on price. This choice almost always ends up being a major blunder later when the business grows and starts pushing large numbers.

With this potential pitfall in mind, what should businesses REALLY consider when choosing a merchant service provider?

Below are some tips that will help you in this important decision

1. Your Business Needs

Think about the needs of your business, what do you really want? Look for a solution that will help your business grow. If you are just starting subscription billing for your business, your needs may probably be different from those of an already established business. In the same line, a SaaS business with 100,000 customers may need a different merchant account from one with a few hundred customers.

The following questions should guide you one the merchant services provider to choose:

  • Do you accept check payments from your customers?
  • Do you accept payment through credit or debit cards?
  • Will you accept direct deposit from your customers?
  • Will you need a shipping address when you complete the transaction?

You can make an informed decision by asking the above questions. However, be careful not to stick to the bare minimum features that will support your business. Keep your business’s growth plans in mind when determining which services you will need from a merchant provider.

2. Customer Preferences

Successful businesses provide solutions to their customers. Think about your customers’ payment preferences and find solutions that address their needs. For example, if you sign up with a merchant account provider that accepts credit cards but your customers prefer making payment through bank transfer, you will not be addressing the preferences of your market and this can lead to meager subscriptions.

Making it easy for customers to pay for your services is crucial to growing your market and building loyalty. Remember, it’s about making sales and what is working in one market may not necessarily work for your market. Get feedback from your customers on the payment methods they prefer and provide a solution.

3. Get the Right and the Best

Consult with industry leaders and billing experts to understand what to expect and compare it with your need. Find out if the merchant services provider will support the payment solution you use. Ask yourself the following questions:

  • Do you need a particular shopping cart to work with the merchant account?
  • Will you need to send invoices to your customers?
  • Will you need to add taxes to your subscription billing?
  • Will you like to offer multiple currency payments to customers?
  • Do you need to add multiple subscriptions to one customer?

Whilst most of the payment gateway merchants won’t have the functionality that you require, it is wise to choose a subscription billing solution which plugs into any payment gateway of your choice.

4. Costs

Consider the costs that come with the merchant service provider. Since you are allowing your customers to make payments online through credit card, debit card or checks, there is a cost you will incur.

For example, there are fixed fees (base cost fees) charged by MasterCard, Visa and Discovery and there are others that can be negotiated (markup fees). Your merchant account provider will also charge you some fees to process your customers’ transactions.

Consider the total cost your business will incur with a merchant service provider. Here is where comparison shopping comes into place. If the merchant will be giving you an written agreement with all the cost break-up details? Beware of merchants who would promise lesser price but won’t put them in writing. You may end up paying higher fees or initial set up costs and higher recurring charges on a monthly basis. Do the math to ensure you are not charged hidden fees that will increase your costs.  But PLEASE don’t make the mistake of looking at just the cost.

5. Reputation of the company

Another thing to consider is the reputation of the company. The reputation of a company is even more important than the price that is charged for the service.

A company with a good reputation is important for your business’s image and operations. Make sure the company is PCI-compliant and follows the best practices when accessing, storing and retrieving customer credit card data. Imagine a scenario where a merchant account provider leaks your customers’ data to third parties or was hacked to leak your customer data, who will up for blame? Customers will place all the blame on your company since they entrusted you with their data. This can have a very negative effect on your business and you can be heavily fined by financial regulatory bodies.

6. Customer Service and Ongoing Support

After signing the contract, you are bound to encounter a number of problems with your merchant account. Perhaps the API is not integrating with your application or the whole billing system is not working as expected. Sometimes, the system may have errors like double charging you customers’ credit cards and if you do not address this, your business can have a large percentage of chargebacks and an unhappy customer base. In case of problems with the merchant system, how will the merchant account provider respond to your concerns?

With online business, your customers can be transacting on your website 24/7, will the merchant be available anytime you need support? What about during the holidays, will the merchant be available when your shopping cart breaks down?

Support is crucial to the ensuring you business operates smoothly. Look for a merchant provider that offers live support and has excellent documentation through online forums. You do not want to always get an automatic response message when you send an inquiry to the company. Ideally, sign up with a company that you can directly talk with someone on the phone on the other end or on live chat.

Getting the right merchant account provider should involve more than simply looking at price. The above are some of the things you consider when you are choosing a merchant service provider for your business.

Now, what other things would you consider when choosing a merchant service provider (payment gateway) for your business?

Author of the post

John Solomon

Marketing Leader / Sales Enabler. Head of India Operations for @Infrascale / @sosonlinebackup.

Subscription Billing Made Easy

Try for free

Recent Blog Posts

Clearing The Financing Hump When You’re a ‘Non-VC-Compatible’ SaaS Company
Clearing The Financing Hump When You’re a ‘Non-VC-Compatible’ SaaS Company

Being 'Non-VC-compatible' shouldn't become the exit sign for opportunities. Here are some alternative SaaS financing options that you should know about. Read More >

Ultimate guide transactional emails
Rethinking Transactional Emails - How to Ace Them, and Why You Should Do It

There's more to transactional emails than you think. Here's how to strike gold with them. Read More >

Failed payments and involuntary churn
Failed Payments and Involuntary Churn - The Definitive Guide

Implement these tactics at every stage of the payment failure life cycle to optimize your revenue recovery, recover as many failed payments as possible, and fight involuntary churn. Read More >

Subscription billing software that lets startups deliver recurring happiness to customers.
How Chargebee Works